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SEPA for a Simpler Europe

The existence of a mandated end date for SEPA migration is frustrating to those of us who do not like to feel that someone else should dictate our priorities. Treasury has plenty of them already, so it is disconcerting that an issue of compliance (bringing with it cost, resourcing issues and quite possibly a minefield of political issues) has been placed at the top of the list.

SEPA migration brings complexities and challenges, but it remains a major opportunity to redefine banking, payment and collection processes, and standardise bank communication – things that are also on most treasurers’ and finance managers’ lists of priorities. In reality, few treasurers are likely to be able to justify a second project to optimise these activities in the foreseeable future, so SEPA compliance should be seen as an opportunity for transformation that is not to be missed.

Every part of the business that is in any way involved in a payment or collection process, from legal through to accounting, accounts payable, accounts receivable, sales and marketing and treasury, at both a local and central level. This in itself presents a unique opportunity to explore ways to work across the business to improve and harmonise processes. But what specific benefits can SEPA migration bring? These are five of the most significant advantages that we have witnessed amongst our customers that we have supported through the migration process so far: 

1. Reduce bank fees

As all Euro payments both within and between EU member states are treated as domestic payments under SEPA, companies with a material volume of credit transfers between Eurozone countries will see a reduction in bank charges.  Furthermore, a harmonised payments and collections landscape requires fewer cash management banks, leading to economies of scale and therefore more opportunity to negotiate. 

2. Rationalise bank accounts and simplify account structures

Many companies have built up a large number of Euro accounts, often with multiple accounts per entity and country, with complex (and costly) cash pooling structures to centralise cash. SEPA migration is an opportunity to rationalise the total number of accounts, which improves control and reduces administration, and also to simplify liquidity management structures that are in place.

3. Centralise payments

SEPA migration should not be seen only a technical project – indeed, technical migration is the area where vendors such as SunGard can help the most. Where we see SEPA projects delivering the greatest value is where treasury and finance focus on reviewing and optimising processes, such as centralising payments. With legal harmonisation through the PSD (Payment Services Directive) that underpins SEPA, it is easier for payment factories to operate on a ‘payments on behalf of’ model. Look out for the next article in this series that addresses payment factories. 

4.  Centralise collections

Centralising collections has typically been more difficult than payments, not least due to the commercial sensitivities involved, and the variety of different payment methods by which customers choose to pay. With rationalised payment instruments in Europe, this becomes easier to achieve, either through a physical collections factory, or virtually through the use of common platforms and processes. Centralising collections can have a dramatic impact on the quality of credit decision-making and monitoring, and on overdue collections. 

5. Standardise bank communication: regionally and globally

Multiple banks, multiple formats and multiple interfaces in a single region result in high costs and compromise controls. SEPA payment instruments use (largely) standard XML-based ISO 20022 formats which helps to streamline bank connectivity. When combined with centralised processes and a rationalised banking structure, enhanced bank communication can be a major ‘win’ as part of a SEPA project. This extends not only to Europe, but globally, as ISO 20022 quickly becomes a global, not only a regional, standard.

Are you in the middle of a SEPA migration project or are you hestitating to start?


Comments: (4)

Gary Wright
Gary Wright 22 March, 2013, 22:02Be the first to give this comment the thumbs up 0 likes

Its a real shame that SEPA has not been marketed as well as it should. It is still a mystery to far too many corporate treasurers. I fear SEPA will continue to be a slow low take up game. Worthy of a Kiwi cricket pitch. How many wickets will SEPA get?

Andrew Owens
Andrew Owens - SunGard AvantGard - London 25 March, 2013, 08:45Be the first to give this comment the thumbs up 0 likes

I agree Gary.  Given that for large multinational corporates, the benefits of fully embracing SEPA are clear, it has been surprising that the level of strategic projects has been less than I would have expected.  As most of the time regulation means a compliance headache for corporations, perhaps it has been too difficult to see past the fact that this is political regulation.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 March, 2013, 12:28Be the first to give this comment the thumbs up 0 likes

@GaryW + 1.

Had I read this post earlier, I wouldn't have left this comment a few minutes ago. Kudos for this article. In the past 7-8 years that I've been involved in SEPA closely - including helping a Top 3 UK bank go live with SCT on the first deadline in Jan. 2008 - this is the first article I've come across that communicates the benefits of SEPA to corporates so succintly. Most others resorted to the subtle threat, "if you don't do SEPA, you'd have to cough up huge payment message repair fees", which is unlikely to work with corporates who have heard many threats like that before.

A Finextra member
A Finextra member 27 March, 2013, 10:15Be the first to give this comment the thumbs up 0 likes

Banks are communicating with their corporate customers on SEPA.

That said, Research shows that midcaps and SMEs are less aware. And that those that leave it late may be putting themselves at a commercial disadvantage.

The message the industry needs to get across is, it is no longer acceptable to postpone making a decision pending more information. Ignorance of a law, or disagreement with it, is no defence. Ask your bank or regulated payments service provider or core technology provider or industry association for help (and remember, there are now 568 Authorised Payment Institutions in the EU, so you have new choices). If you choose to leave it late, do so based on a considered understanding of the law, the penalties, and the upsides of for example adoption of ISO20022. Don't assume the later end-date for the non-€ countries is only good news - penalties may apply later, but trading parties in the Eurozone will have 2 years head start.

Andrew Owens

Andrew Owens

SVP - Enterprise Payments

SunGard AvantGard

Member since

05 Feb 2013



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